November 17, 2013
Just some links today
Andrew Huszar: Confessions of a Quantitative Easer, on Online.WSJ.Com.
It wasn't long before my old doubts resurfaced. Despite the Fed's rhetoric, my program wasn't helping to make credit any more accessible for the average American. The banks were only issuing fewer and fewer loans. More insidiously, whatever credit they were extending wasn't getting much cheaper. QE may have been driving down the wholesale cost for banks to make loans, but Wall Street was pocketing most of the extra cash."
Recession clouds loom again over faltering euro zone countries , on TheGlobeAndMail.Com.
France was a bigger disappointment. Its economy contracted by 0.1 per cent in the third quarter. The numbers come as a blow to President François Hollande, who faces extremely low popularity ratings and a tax revolt. Last week, France was downgraded by Standard & Poor's, the U.S. debt ratings agency, which cast doubt on the country's growth prospects."
Retail war hits Wal-Mart, on TheGlobeAndMail.Com.
Same store sales are down, yet Wal-Mart beat estimates by a penny? How did it do that? Well, despite its announcements to the contrary, Wal-Mart shrunk its staff. The stores have a natural turnover anyway. It was simple to not replace some workers leaving. Wal-Mart is a top-down one-size-fits all kind of organization (Which is why you will find kudzu killer on the shelves in the garden centers in places like Wyoming, Montana, and North Dakota.) If sales are awful and staffs have to be reduced in one part of the country, then they get reduced everywhere in the U.S. So Wal-Mart made its numbers on the backs of its workers. This is not a feat it will be able to repeat often.
Five years after the economic meltdown, the world is still an ugly place, on TheGlobeAndMail.Com.
Even in Canada, which has fared better than most and recovered all of the jobs lost to the recession, the jobless rate is 6.9 per cent, with 1.3 million people out of work.
In short, anything resembling a return to how things looked before the crisis appears not just elusive, but still far off."
Economy's supposed slow recovery is really a 'secular stagnation', on TheGlobeAndMail.Com.
Gross domestic product per capita in the advanced industrial countries fell 4.1 per cent in 2009 before recovering by 2.4 per cent in 2010. But growth then shrank to just 1.1 per cent in 2011 and just 0.7 per cent in 2012, and is forecast at 0.7 per cent again in 2013. Canadian performance has been only slightly above average."
Monetary Policy Myths Debunked: Money Is Not Capital, the Fed Does Not Lead Markets, on Minyanville.Com.
The Fed is operating under a false premise that it controls levers that run the economy. The Fed is operating under the premise that it can calibrate aggregate demand by adjusting these levers. Can you name a time in modern monetary history where the FOMC's decision to move the Fed funds rate triggered a chain of events that affected short-term rates? The market doesn't just wait around for the Fed to tell it what to do. The market moves first and it moves because of changes in the supply and demand for capital."
Which Cities Americans Are Moving to - and Escaping From, on Finance.Yahoo.Com.
Cities and states that gain population always enjoy greater political power, of course, as their representation in Washington increases. And economic momentum can be self-perpetuating, since more companies are likely to relocate to a particular region once other businesses have gotten the ball rolling. So there may continue to be a national power shift that favors the south and the mountain states, at the expense of the trendy right and left coasts and unionized cities of the upper Midwest."
The Bitcoin Wealth Effect: The Currency's New Record Is Chilling Sign, on Minyanville.Com.
Crusader Robert Reich turns a lens on U.S. income inequality , on TheGlobeAndMail.Com.
Well, one to pay for the other. It's no coincidence that Bill de Blasio [has been elected mayor of New York City], that's exactly his platform: raising taxes on the wealthy and using it to improve public education.
It's also important to raise the minimum wage, expand what we call the earned income tax credit, cap the size of the biggest Wall Street banks, resurrect the Glass-Steagall Act so we don't have a replay of 2008. I think we need to unionize low-wage workers, particularly in big-box retailers like Wal-Mart. We’re not talking revolution here. This is within the mainstream of the American reform tradition. And also - going back to tax rates we had before Ronald Reagan. People say that's politically impossible. Why is it politically impossible if it was politically possible between 1946 and 1981?"
Doug Casey in Cyprus: Crisis Investing in Action, on CaseyResearch.Com.
Essentially, Cyprus became a favorite place for people of many nationalities—particularly, Russians—to put money that they wanted to diversify offshore.
The banks became overwhelmed with large amounts of money that dwarfed their capital. When a bank takes money in, it's got to find something to do with that money, and when the local economy couldn't absorb much of it, they became quite reckless.
Since most Cypriots are Greek-speakers, they naturally looked to Athens and wound up buying a lot of Greek government bonds, partly for patriotic reasons and partly because the yields were higher than elsewhere.
Once the Greek government bonds went south, it wiped out the capital base of the Cypriot banks that had purchased them. The Cypriot government was not in a financial position to bail them out, so instead they had what is called a bail-in, where large depositors took a haircut."
Caught in a Revolving Door of Unemployment, on NYTimes.Com.
The unemployment rate has fallen to 7.3 percent, down from 10 percent four years ago. Private businesses have added about 7.6 million positions over the same period. But while recent numbers show that there are about as many people unemployed for short periods as in 2007 - before the crisis hit - they also show that long-term joblessness is up 213 percent.
In part, that's because people don't return to work in an orderly, first-fired, first-hired fashion. In any given month, a newly jobless worker has about a 20 to 30 percent chance of finding a new job. By the time he or she has been out of work for six months, though, the chance drops to one in 10, according to research by the Federal Reserve Bank of San Francisco.
Facing those kinds of odds, some of the long-term jobless have simply given up and dropped out of the labor force. So while official figures show that the number of long-term jobless has fallen steeply from its recessionary high of 6.7 million, many researchers fear that this number could mean as much bad news as good. Workers over 50 may be biding their time until they can start receiving Social Security. Younger workers may be going to school to avoid a tough job market. Others may be going on disability, helping to explain that program's surging rolls."
Economy offers little cheer ahead of holidays, on MarketWatch.Com.
The company's chief executive, Mike Duke, said 'some customers feel uncertainty about the economy, government, jobs stability and their need to take care of their families through the holidays.'
The government's retail-sales report for October, released Wednesday, is forecast to be flat to slightly higher. The federal shutdown may have curtailed some spending because hundreds of thousands of workers were not paid immediately, but the sluggish pace of U.S. retail sales is largely a story of stagnant paychecks and a persistently high unemployment rate.
'There's really been no growth in [inflation-adjusted] disposable income,' said Steven Ricchiuto, chief U.S. economist of Mizuho Securities. 'Consumers are buying cars but not a lot of much else.'"
November 15, 2013
Tobby Connor sends along this posting:
"The blogosphere seems to have gotten the idea that I am predicting $1000 as a sure thing. Nothing could be further from the truth. I've said many times in the past that I think there are parties trying to push gold to that level. Will they succeed is anyone's guess, but I think they are clearly trying. I also believe that the bear market this past year was an artificial and manufactured move.
I've been very clear. On Sept 3 I recommended everyone exit all long positions in the metals and go to cash until gold either confirms that the bottom was formed on June 28th, or it makes it back down to $1030. That is the point where one could back up the truck so to speak.
In order to confirm that the bottom was made on June 28th gold needs to reverse the pattern of lower intermediate lows and lower intermediate highs. So far it hasn't even come close to doing that yet.
The first step in that direction would be for gold to form a higher daily cycle high. It had a chance to do that during the last daily cycle if gold could have moved above $1375. That cycle failed when it was only able to reach $1361 before the daily cycle rolled over and began moving down into its daily cycle low.
At this point the door is now open for gold to make another lower low if it drops below $1251.
If gold does drop below $1251 in the next few days it will confirm that the current intermediate cycle did not bottom in October and is still in progress. If this scenario comes to pass then the odds are going to go up significantly that gold will have a full test of the June low at $1179.
I also think if gold gets anywhere near $1179 we will have another one of those middle of the night attacks where 200-300 tons of gold are dumped on the market to run stops. Traders will wake up to positions already underwater, and the selling pressure will cascade until gold reaches the next major support zone. That support zone is the $1030 level that I have been talking about for months.
On the other hand if gold can rally back above $1361 then that would make a higher high and a higher low. That would reverse the down trend and it would also confirm that the low in October was a higher order intermediate degree bottom, and not just a minor daily cycle bottom. If gold can recover $1361 then I think that is the all clear signal and it's time to jump back in the pool.
As it stands today there is just no compelling reason to trade gold either short or long. The correct position is to sit in cash until we see which line is going to break first.
$1250 = bad times continue, and high odds of seeing $1030.
$1362 = the good times are here again. The bull has broken the manipulation.
Any directional trade while gold remains between those two lines is just a coin flip in my opinion. It could go either way. I just don't see any reason to risk capital on a coin flip when all one has to do is wait patiently for 5-10 days and they will have an answer with a high degree of certainty as to which way gold is going."
November 11, 2013
Just some links today
The Fed Is Bungling the World's Reserve Currency, on Minyanville.Com.
On the other hand, when an emerging economy's government runs a large and systemic deficit, there are serious fiscal consequences. The value of the currency immediately falls, inflation occurs, and the markets force up interest rates thus impacting that economy's growth.
The reserve currency status and the accompanying trust in the currency have also resulted in the investment of excess dollars in the international system back into US Treasury securities."
Is Bank of America worth more dead or alive?, on MarketWatch.Com.
This means that Bank of America is worth nearly as much dead as alive, and that investors are assigning virtually no value at all to the bank's continuing operations. That seems a little harsh given the progress the bank has made in cleaning up its loan book and given the nationwide improvement in home prices. The S&P Case-Shiller 20-City Home Price Index is up about 12% over the past 12 months alone."
Some of us subscribe to the Large Object Theory of History. Basically, it is the idea that organisms and/or organizations will keep growing, keep getting impossibly large until they can no longer sustain themselves in their environment (think Dinosaurs, or AIG) (for further edification read the children's book: The Pushcart War). Has Bank of America reached that stage? Certainly, it has HUGE assets. But just how adept is it in its own environment? Who else might also be too-big-to-avoid-failing?.....Fanny Mae and Freddy Mac may be if we can find the right politician to point out that those two monarchs have not a stitch of clothing on.
Simple Sitting Test Predicts How Long You'll Live, on DiscoverMagazine.Com.
Araujo noticed long ago that many of his patients, particularly older people, had trouble with ordinary motions such as bending down to pick up something off the floor - difficulty indicative of a loss of flexibility. As people age, he knew, reduced muscle power and loss of balance can greatly increase the risk of dangerous falls."
Feds report $9.7B loss on GM shares, on DetroitNews.Com.
The taxpayers’ ownership stake in the Detroit-based automaker - swapped for more than $40 billion in loans, was initially 60.8 percent, but is now down to about 7 percent, the Treasury said. 'Because the common stock sales have all taken place below Treasury's break even price, Treasury has so far booked a loss of $9.7 billion on the sales,' the report said."
Housing Stocks To Pop Up Into 2014, on MCOscillator.Com.
Chase Isn't The Only Bank In Trouble, on RollingStone.Com.
As one friend of mine put it, 'Whatever those morons put aside for settlements, they'd better double it.'"
Treasure Hunters of the Financial Crisis, on NYTimes.Com.
'Unless the second Great Depression lies ahead,' Howard S. Marks, Oaktree's chairman, wrote to their clients on Oct. 6, 2008, 'today's purchases should produce substantial returns, and in a few years we'll reminisce together about how easy it was to take advantage of the bargains of 2008-09.'
It paid off. With the help of an extraordinary government bailout and stimulus, the second Great Depression never came and a global recession eventually faded. A half-decade later, Mr. Marks's prediction has come to pass. Virtually all of the debt bought on the cheap has fully recovered in value. The trade yielded spectacular profits, earning about $6 billion in gains for Oaktree's investors and $1.5 billion for Mr. Karsh, Mr. Marks and their partners."
The Most Compelling Argument for Owning Silver I've Ever Heard, on DailyWealth.Com.
It's obvious, as Sprott notes, silver data has been 'very, very misstated.' Sprott ends his speech saying, 'There's $22 billion of silver available in the world, of which the ETFs already own half... and between you guys and us, we probably own the other half... which means there's nothing left."
Sprott's comments remind me of a conversation I had with a friend this week... My friend is one of the largest gold and silver coin dealers in the country. He said he hopes silver retreats, because the coins are going crazy. 'People have no idea how small the market is,' he said. 'I've seen prices jump 10% in the last week.'
Sprott's argument only takes the investment demand for silver into account. And while investors do hoard silver, more than 95% of today's demand for silver comes from industry. And when that silver is consumed, it's gone forever. Silver's current production is just enough to meet the industrial demand. In other words, there is virtually zero new silver available for investment purposes."
November 10, 2013
Just some links today
The Story of How America Was Packaged and Sold, on DailyWealth.Com.
Forget the Shutdown! US Economy About to Hit the Vortex of a Structural Trap, on Minyanville.Com.
November 5, 2013
Tobby Connor sends along this posting:
"At the moment gold is at a critical crossroads. If it can move above $1375 it will confirm that an intermediate degree bottom occurred last month at $1251, and start a pattern of higher highs. If however gold continues lower and breaks below that $1251 level it will confirm that an intermediate degree decline is still in progress and the recent bounce was nothing more than another bull trap to work off the short-term oversold levels.
Actually based on my cycles analysis I think we can even narrow the band a little tighter. If gold can move above the October 28 high at $1361 over the next several days it would confirm that this daily cycle has become right translated and complete a new pattern of higher highs and higher lows.
If however gold moves below Friday's half cycle low of $1305 it would confirm that the daily cycle has topped in a left translated manner and the odds would then be very high that the October low at $1251 is going to be broken over the next 2-3 weeks.
Until one of these lines in the sand get broken, there is just no compelling reason to place a directional trade in the precious metals market.
More in last night's report."
November 3, 2013
Here are some more links.
This commodity is almost guaranteed to soar now, on TheDailyCrux.Com.
This is a classic contrarian bet… Everyone expects perfect news in the corn market. They expect a perfect crop… a record crop. And they expect prices to continue downward.
There is no room for bad news."
General Motors Executive Warns of Impending Auto Bubble , on FreeBeacon.Com.
Using subprime loans and easy credit to move cars off the lot may not be GM Canada's goal, but its parent company, bailed-out, Detroit-based General Motors, has been moving in that direction, as the Washington Free Beacon reported in February. Nearly 90 percent of loans issued by GM Financial were subprime."
Test failures at the highs suggest downside to come, on MarketWatch.Com.
The Story of How America Was Packaged and Sold, on DailyWealth.Com.
November 2, 2013
Tobby Connor sends along this posting:
A rather interesting development occurred on Friday, and one that I wasn't really expecting. The dollar sliced right through its intermediate trend line on its first attempt. I thought for sure we would see some kind of pullback from that trend line before a break. In my opinion this signals that there are a lot of people caught on the wrong side of this market.
The ferocity of the first five days out of this yearly cycle low has me wondering if the megaphone pattern isn't still in play and we're about to see a test of the upper trend line area over the next 1-2 months.
If we take a look at the euro chart we can see that the daily euro cycle is only on day 12. That implies it still has another 8-13 days before finding its next daily cycle bottom. The dollar should have those same 8-13 days to rally before this daily cycle tops.
Originally I thought we might see a test of the 200 day moving average over the next 4-6 weeks. But the explosive nature of the first five days, and taking into account this daily cycle still has another 8-13 days to go before topping, we could see a test and break of the 200 day moving average over the next 1-2 weeks. I think we would then have at least one more daily cycle higher before the intermediate cycle tops. Two daily cycles of this kind of behavior could definitely send the dollar back up to test the upper megaphone trend line over the next 2 months.
I'm starting to get the feeling that this rally out of the yearly cycle low is going to be a lot more powerful then almost anyone is expecting, including me. In order to turn this back down it may require a fundamental change in the market such as an increase in QE. I don't believe that is politically feasible at the moment unless the stock market really starts to tank in front of the Christmas holidays."
Here are some links.
A Radical New Approach to Energy Production, on GrowthStockWire.Com.
And it's capable of drilling for natural gas almost anywhere offshore. The clean fuel is then turned into LNG on the tanker by being cooled to -260 degrees Fahrenheit, which turns it into a liquid. This process shrinks the volume of the gas by 600 times – allowing even more natural gas to be shipped."
Porter Stansberry: This could be the most shocking "End of America" prediction I've ever made, on TheDailyCrux.Com.
More Gains Ahead for This Trophy Asset , on GrowthStockWire.Com.
Nobody Should Shed a Tear for JP Morgan Chase, on RollingStone.Com.
The hypocrisy of Wall Street 'capitalism' , on Salon.Com.
Stocks Have Reached a Rare Bearish Extreme, on GrowthStockWire.Com.
October 31, 2013
by Rascal J. Headwanker
WASHINGTON - The White House and Congressional leaders today announced what promises to be an historic compromise. After days and weeks of secret meetings held between the principal leaders of the nation, major steps appear to have been taken to put the nation's fiscal house in order.
Republicans compromise on key issues
For their part, Speaker of the House, John Boehner, and Senate Minority Leader, Mitch McConnell, have committed the Republicans in Congress to the following points.
1. A general reduction in military spending. Both Boehner and McConnell agreed that having a 700 ship navy is a bit of overkill, when one considers that one carrier task force has more fire power than the whole of the Japanese Navy had in World War II.
2. A review of the development of the newest fighter jet in the U.S. arsenal, the F-35. Since, as both Boehner and McConnell admitted, "it appears to be a turkey."
3. Agreement that fighting two wars at the same time for well over a decade is stupid and more expensive than the U.S. economy can really support.
4. Agreement that invading someone else's country is generally a bad thing to do.
5. Agreement on trimming down, and eventually elimating the whole farm subsidy program. "Farmers are doing fine now, and don't need a government hand-out every year, said Speaker Boehner. "Yeah," agreed McConnell, "it's time to wean them off free government money."
6. Agreement to eliminate, over the next two years, most corporate tax loopholes, subsidies, and protective tarriffs. Both agreed that, since the Supreme Court has ruled that Corporations are people, it is time for Exxon Mobile and General Electric to pay income tax.
7. Agreement to increase income tax on the top 1 percent of earners in the United States by elimating all income tax loopholes. McConnell and Boehner both admitted that the average Joe had no chance of successfully steering a beneficial loophole through the legislative process; and that, therefore, all loopholes are actually written by and for the wealthy.
Democrats compromise on key issues
President Obama, Senate Majority Leader Harry Reid, and House Minority Leader Nancy Pelosi also came to support some major compromises of their own including the following.
1. Agreement on the principle that government deficit spending is generally a bad idea that robs the average citizen of the value of his savings through inflation and depresses investment that leads to future economic growth.
2. Agreement that Big Banks and Brokerage houses on Wall Street have had undue influence in the affairs of the nation, are unrepentant shysters, that they should be allowed to actually fail when they screw up, and that their leaders should go to prison when they violate laws. Further, both Reid and Pelosi offered to never again accept campaign donations, either directly or indirectly from these big firms.
3. Agreement that the Federal Reserve should not be treated and should not act as a giant piggy bank, a sugar plum fairy that bails out Congress and the Administration ad naseum.
4. Agreement that the Middle Class is now paying what is historically the smallest Federal tax burden it has ever paid, and that someone, namely the Democrats, need to tell the Middle Class to buck up, tighten the belt, and pay their share of the Federal debt. "Yes," agreed President Obama, we need to tell the average American that he should pay for what he gets, when he gets it. Selling this idea to that average American won't be an easy job. But I guess that is what leadership is all about."
5. Agreement that the Federal Government's role in Education has been a continuous and unwavering record of failure, that it is time for the Federal Government to get out of the Education Business.
6. Agreement that the Federal Government had no business being in the business of extending Mortgages and Mortgage guarantees, that the job really should be left to private industry that can afford to take the risks involved, reap the rewards and go broke when mistakes are made. Reid and Pelosi both agreed that, "Fannie Mae and Freddy Mac are terrible ideas that should be killed."
7. Agreement that social programs should in no way ever be entitlements, that they should be designed to get those who are young and robust working. Minority Leader Pelosi stated that, "we should insist that young women who have babies should not make a career of being unsupported mothers, that they should be encouraged to find a way to support their own offspring, and that they should aquire education and skills along the way. Further, better efforts need to be made to insure that males who impregnate unwed mothers are forced to provide for their offspring."
8. All three Democratic leaders adamantly agreed to support the creation, somewhere on the West Coast of the United States, a Statue of Responsibility akin to the Stutue of Liberty in New York Harbor. In a statement, endorsed by Obama, Reid, and Pelosi, the three agreed the idea of responsibility for one's own actions, the idea of responsibility for one's own outcomes, had been neglected by political leaders in general and by Democratic Leadership specifically. The statement went on: "What is needed is for citizens to step and become more responsible, and for government to become more responsible too. It is long past time for the taxes, which are the life and sweat of the nation, to be wasted in such a prolifigate way."